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Technology Stocks : Loral Space & Communications

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To: donss who wrote (1675)	1/10/1998 9:48:00 AM
From: ccryder	Read Replies (1) of 10852

I asked the same question of my broker. The CBOE decides on initial terms and makes the initial market along with their bankers and investment partners. That means that there is money to be lost by the investment bankers that make this initial market. But there is a great deal of care given to setting the time value. On the seedier side of the street, options are very subject to news bending as expiration approaches. And since most expire worthless, because they are used as hedges that don't need to be executed, the options market makers are usually way ahead. As more of the calls are traded by the public, the risk to the initial writers reduces. As the LOR potential becomes more accepted by 'the street' I think the time premium will rise. In most stocks the time premium appears to be a calculated function of Beta. A more volatile stock like GSTRF has a high time premium whereas the LOR does not. The time premiums charged for the LOR options, particularily the LEAPS is quite low so we LEAPS buyers should do very well. But beware as expiration approaches if there is lots of money to be lost by the LEAPS writers.

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